Similar to most financial topics, benefit elections are not a one-size fits all recommendation. Open Enrollment occurs at the end of each year and remains open for a month and a half. During this period, individuals can elect health insurance coverage through their employer. In the event no election has been made, they will be ineligible to enroll again until the following Open Enrollment period starts, unless an exception has been granted due to a qualifying event.
It’s important to consider two of the 6 money decisions when electing your benefits; how you will protect yourself in an emergency situation and ways to save on taxes. It’s important to review the details of your benefits with your financial advisor every year to ensure you are capitalizing on each employee benefit.
Below is a series of questions that are often asked to narrow down which insurance coverage may be most appropriate for your situation.
As you answer these questions to determine your insurance coverage needs, also consider the timing of this period, common mistakes people make during the open enrollment, tax savings options and why you shouldn’t miss the match. Let’s dive deeper into these key considerations.
This year the benefits election period is from November 1st to December 15th throughout the United States.
Special enrollment periods can occur outside of your typical enrollment period. Certain life events qualify you for a special enrollment period; getting married, having or adopting a baby, or losing existing coverage through a life event. Consult with your benefits department on special enrollments periods.
This is an important time to review and/or update the benefits that they have elected through their employer. It is very common for modifications to be recommended on an annual basis due to changes that can come from either the specific benefits package available or due to changes in family circumstances.
Mistake One: Too often doctors carry-over health insurance elections year-after-year without evaluating any changes to coverage, premiums or assessing new options available. We have experienced recent hospital systems shift towards high deductible health insurance plans as well as transitioning away from the traditional HMO or PPO type of health insurance options. If you are unfamiliar with high deductible plans and have routine specialist doctor appointments or prescriptions, there could be an initial shock with your first bill.
Mistake Two: Forgetting to update the amounts that they are allocating towards their retirement plans based on the new mandated limits and/or their new income levels.
Mistake Three: Being unaware that your supplemental life insurance coverage is “age banded”; the younger you are when purchasing supplemental group life insurance, the lower your premium is. As you age, the premium costs (or mortality expense) may gradually increase as well. Be sure to evaluate the premium cost overtime for group supplemental life insurance coverage versus personal coverage (outside of your employer).
Mistake Four: Not taking advantage of Dependent Care Flexible Savings Accounts. Dependent Care FSAs are set up through the employer and allow for employees to set aside pre-tax dollars to help with dependent care expenses, thus reducing your taxable income.
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Absolutely, especially if there is access to a Health Savings Account (HSA) within their plans. HSA’s let you put away pre-tax money indefinitely for medical needs, potentially lowering your tax liability the end of the year. As long as withdrawals are used to pay for qualified medical expenses, the funds will not be taxed. Contrary, any distributions made for reasons other than medical expenses may be subject to taxation.
An employer’s match into a retirement plan is basically free money; by not contributing up to their match, you are essentially reducing your income by a certain percentage.
Depending on the specific illness, the options available through the group benefits package may be invaluable because you may not be eligible for quality coverage outside of the group plans.
If you are married and your spouse also has group benefits through his/her employer, it is best practice to review both benefit packages before making any final elections, as one spouses plan may offer benefits more advantageous than the others.
Open Enrollment can seem like an overwhelming concept in a short amount of time. Your financial advisor can walk you through your personal situation to determine which benefit elections are best suited for you and your family. There are many options and decisions to make, but you do not have to make them alone.
David Belinkie, CFP® is a Financial Planner with Spaugh Dameron Tenny, LLC. For David, the client relationship grows even deeper when the financial plan is put into action. He feels very strongly about educating clients so that they have all the information they need to make suitable decisions for their specific situation.
For over 50 years, Spaugh Dameron Tenny has provided comprehensive financial planning for physicians and dentists in Charlotte, NC. In addition to providing personalized advice, we walk our clients through their options to help maximize finances and maintain financial security.
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